The cancellation of the only shipping service connecting Perth and the state's northern towns has sparked industrial action amid concerns of increased living costs.

The State Government provides an $8 million a year subsidy of the only shipping route that runs from Perth to Darwin, providing a freight service to the towns of Karratha, Hedland, Broome and Wyndham.

The company involved has pulled out because the shipping route is no longer viable and the State Government is unlikely to re-offer the subsidy, funded through to 2015.

Broome Chamber of Commerce president Tony Proctor says it is a blow for northern communities which will now have to rely solely on more expensive road transport.

"It seems to me to be a very myopic, bureaucratic, ill-informed recommendation to Government," he said.

"I think it was quite illogical, one-sided and without any consideration for the needs of developing the north-west, and providing a viable and alternative transport option as well as employment opportunities."

The Maritime Union of Australia (MUA) says 25 jobs will be lost.

Some of its members are staging a sit-in on the government-subsidised ship which is currently docked at Broome port, and due to make its last cargo delivery.

The striking unionists are refusing to unload the ship's cargo until the Government agrees to try and restart the service.

The MUA's assistant state secretary Will Tracey says it is an issue that will affect all north-west residents.

"We'd see a minimum of a 25 per cent increase in the cost of goods to these north-west communities," he said.

"We've also got a number of key businesses in the north-west, there's a minimum of about 15 or 20 of these businesses are using this service now on an ongoing basis."

Mr Tracey says they will continue the industrial action.

"This current sit-in will last until we get someone to listen to us," he said.

"The problem we've had at the moment is that there's been a refusal by the Government to engage on this issue.

"I guess one of the things we're wondering is, not only have we got concerns about what Barnett's done, but where's Brendon Grylls? He's the Member for Pilbara."

The Transport Minister Troy Buswell says the union is ill-informed and trying to capitalise on a commercial situation it knows nothing about.

In a written statement, the Minister says the shipping company involved sought an extra $154,000 in funding per week - on top of the existing subsidy - which the State Government was not prepared to offer.

He says the contract was funded through to 2015, and the company's decision to cancel the service early was not related to any reduction or changes to the subsidy.